Thank you to everyone who participated in the survey - the results have been extremely interesting and have helped gauge the general level of understanding of the issues associated with the abolition of the default retirement age, how employers intend to deal with retirement in the future and what help / guidance employers need. Background
The Default Retirement Age (DRA) has been abolished with effect from 6 April 2011, subject to transitional provisions. There will no longer be a statutory retirement procedure which allows employers to safely retire employees.
Employers have to decide how to manage older workers in the future and have two choices (1) maintain a retirement age which can be objectively justified, (2) operate without a retirement age. Summary of Key Findings
- Of the Respondents, 85.4% thought that they had age diverse workforces. 73.3% of Respondents had operated the Default Retirement Age of 65 but 80% stated that they would now operate without a retirement age.
- 57.1% of Respondents` companies consider there will be more health issues/impairments associated with employees working past 65. However, only 45.2% of Respondents` companies intend to consider more flexible working practices for older employees and only 39% of employers stated that they would provide more training to line managers on performance and sickness management issues.
- Only 19% of Respondents` companies have taken steps to encourage job applications from older workers despite 95.2% of Respondents consider the knowledge and skills of older workers are valuable.
- 71.4% of Respondents consider that attitudes towards older workers are shifting away from negative stereotypes. Furthermore, only 26.2% believe there is resistance to older workers in their companies.
- Only 46.7% of Respondents felt that there had been enough Government Guidance on the subject.
This online survey was conducted between 18 May and 1 June 2011 with 48 Respondents. Responses were received from a range of employers with employee numbers from 1-25 to 1000+ and therefore, the results of the survey represent a diverse cross section of businesses. Results and commentary
- Of the Respondents, 85.4% thought that they had age diverse workforces however, 73.3% of Respondents operated the Default Retirement Age of 65.
- 71.4% of the Respondents considered that attitudes towards older workers are shifting away from negative stereotypes. Furthermore, only 26.2% believe there is resistance to older workers in their companies.
Operating without a retirement age
- A summary of some of the interesting results is set out below. Surprisingly, 46.7% of Respondents felt that there had been enough Government Guidance on the subject with 42.2% disagreeing and 11.1% stating that they didn`t know.
80% of Respondents stated that their company did not intend to maintain a retirement age, with 11.1% stating that they did not know the intentions of their company.
This supports the view that removing a retirement age is seen as the safer option. Retirement will no longer be an automatically fair reason for dismissal but older workers can still be dismissed in all the other ways that younger employees can although employers will need to adopt a different attitude and to take into account the higher chance of disability or age impacting on performance. For example, if an older worker is not performing to the expected standard, the employee can be performance managed in the same way as any other worker which could ultimately lead to the employee`s dismissal although this could mean an undignified and upsetting end for employees who would otherwise have retired.
There is also a greater chance of dismissals in these types of circumstances attracting disability discrimination related claims. 57.1% of Respondents considered that there will be more health issues or impairments associated with employees working past 65 although the Government Consultation on the abolition of the default retirement age states that, except in a very limited range of jobs, work performance does not deteriorate with age, at least up to the age of 70.
A frequently asked question is whether retirement can ever be mentioned in workplace discussions. It is unlikely that you will want to ask a 40 year old employee about retirement and so questions will need to be phrased in such a way as to apply to all employees. This could entail asking about plans over the next 2-5 years so that you cover topics such as promotion, retirement and sabbaticals.
Respondents to the survey were asked how their companies would instigate retirement discussions regardless of whether a retirement age was retained. 70% indicated that this would be through some form of one to one meeting or appraisal with 17% of the Respondents stating that they would let the employee approach them.
When it came to how employees could raise retirement discussions with the company then 50% of Respondents felt that the employee could raise the matter with their line manager.
This concept of facilitating future career discussions through workplace discussions or appraisals seems to be sensible. However, whether an employee is willing to divulge information about their retirement plans is a different matter. Why would an employee tell you they plan to retire next year when they do not need to? What incentive is there for the employee? The employee can simply hand in their notice when they wish to do so. 65% of Respondents were planning to review their appraisal systems to include discussion of future aspirations.
Knowing when employees plan to retire helps employers to plan their workforces. However, the situation without a retirement age would put older workers in the same position as younger workers. Therefore, the concerns in this regard may be a little misplaced and discriminatory. That said, in a smaller organisation where progression may be limited if senior staff do not move on, there could be other arguments which come into play such as retention and motivation of younger employees. 50% of Respondents had not yet assessed the impact of the abolition of the default retirement age on retention and promotion of younger workers. Issues which employers will need to grapple with include:
- Succession planning.
- Performance management.
- Impairments related to age and long term sickness issues.
- Not treating younger workers less favourably.
- Training managers in avoiding harassment.
- Having an effective managing disability policy.
Surprisingly, only 39% of employers stated that they would provide more training to line managers on performance and sickness management issues. Maintaining a Retirement Age
The phrase Employer Justified Retirement Age ("EJRA") has been used by the Government and ACAS to describe the ongoing use of a retirement age after the abolition of the default retirement age.
Use of an EJRA is seen as a more risky route, as dismissing an employee at a set age will be direct age discrimination, unless it can be objectively justified. There may be few jobs where it will be justified to have a blanket policy of dismissing people upon reaching a certain age rather than allowing for individual assessment of capability and performance to operate as they would for workers of other ages.
Of the 8.9% of Respondents who stated that they will maintain a retirement age, 50% stated that the age used would still be 65. Some of the reasons given to justify this age included:
- Requirements of role e.g. physical fitness.
- Career objectives and a pleasant supportive culture.
- Same as government retirement age.
- Reduced ability.
One Respondent stated that it would use an EJRA of 75 for people with company cars as after that date they would not be insured to drive. However, whether there is an objective justification defence will require a much more in depth analysis of what the legitimate aim associated with retiring employees at 75 is and whether there is a more proportionate means of achieving it. For example, could employees who can no longer drive be moved on to other duties? What happens with other employees who become unable to drive for a reason other than age? ACAS has noted that the test of objective justification may not be an easy one to pass.
There has not been much useful guidance from the courts so far, as the European cases have taken a different approach from that adopted by UK tribunals. The European cases have suggested that it would not be too difficult to justify a mandatory retirement age with the general theme running behind these decisions being that employment should be shared between the generations. However, pensions may not be an adequate replacement for normal income. There is also the issue of self-image and self-esteem that can be lost if somebody`s employment is terminated for no good reason. UK tribunals have been reluctant so far to follow the liberal approach of the ECJ when it comes to justifying age discrimination. That said, in the well known case of Seldon v Clarkson, Wright & Jakes (2010) the Court of Appeal did uphold the retirement age of 65 as justified for law firm partners. The rationale included the fact that the government considered a compulsory retirement age of 65 was acceptable for employees generally. That part of the justification will no longer exist from 1 October 2011. The case is also on appeal to the Supreme Court and the outcome of that is awaited. What do you need to consider now?
The abolition of the default retirement age provides a good opportunity for employers to review their practices and processes for managing employees and their performance. Employers should consider whether to:
- Keep a retirement age or operate without one.
- Offer alternative schemes, such as voluntary retirement schemes to encourage old employees to retire and whether these could be justified.
- Introduce flexible working arrangements to give employees a wider range of choices as the approach pensionable age. Again, these would have to be justified if such flexibility is not offered to all ages.
- Allow managers to discuss retirement plans with employees and how.
- Remove any reference to retirement ages in contracts of employment.
- Assess what the financial risk is of increased successful tribunal claims, if there is no mandatory retirement age to limit compensation.
- Review benefit schemes such as share schemes where provisions relating to good leader/bad leader status may refer to retirement.
- Stop providing insurance benefits such as health care to those over 65 (which will be permitted).
Don`t forget that abolishing retirement ages may have consequences for recruitment practices as well. Employers will be vulnerable to claims of age discrimination if they fail to consider older workers who want to carry on working past 65. 71.4% of Respondents had not taken steps to encourage applications from older workers.